Supplier Development’s Role in Next Generation Supply Management

The main purpose for this article is to insist that the suppler management function of any organization should have a seat at the table when it comes to making major decisions that affect the concerned firm in one or another way. Supplier management function, in the coming generation, promises to play a major role in issues pertaining financial goals and strategic directions the company plans to take.

Supply management in the coming generation focuses on developing a world class base of supply. The major reason as to why you should put your supplier management function at the table’s forefront is that it can play major crucial roles when it comes to progressive OEM supply management organizations. If you are wondering how this will create a world class supply base, your answer is this. A world class supply base can only be considered world class if suppliers support a customer’s corporate strategic plan for OEM. This is because the capabilities of a supplier have to be aligned with certain major strategies that a firm has.

What hinders all this from happening is that there are irrelevant strategies formed for the supply management function that actually do not work to benefit the company. Companies should therefore see to it that the goals of their supply function conquer with the organization’s goals. The procurement function, for example, focuses on piece-price reduction for most firms. If this is the case then:

The chances of the strategies of the supply management function being aligned with that of the organization have been compromised.

The company probably deals with a business of commodities.

This means that companies that give the procurement function the forefront and leave behind the supply management function in trying to align the organization’s strategies with the functions will not be able to develop the so desired world class supply base. This is because strategic suppliers work with the company’s strategic plans to make the company succeed. The main points to note here are:

Giving the supply management function a forefront shows suppliers that the organization is focusing on supply.

It shows suppliers that you will not mess with their financial strategies in any way.

Suppliers also want to see that they will have a share of the financial benefits that the organization makes. This only comes about when an organization focuses on building a build-to-demand business. Most companies nowadays give the procurement function the upper hand and hence need to change. There is also need to know that the suppliers have to have knowledge of this. The company will undoubtedly become unstoppable in case such changes are effected.

Many OEMs would be reluctant to admit that they produce products of commodity type yet they focus on reducing piece prices. This brings the disconnection between procurement and the whole corporate strategies. If this is noted early and acted upon, the procurement will definitely get increased bottom line conclusions. The only problem is that most companies are reluctant to implement such kind of changes.